A Peacefully Emerging China?

Grace Guo

Garth Evans, Australia’s former minister of foreign affairs once famously called the Asian Pacific Economic Co-operation (APEC) “four adjectives in search of a noun”. Since its inception in 1989, rhetoric and debate about the significance and effectiveness of APEC has been abundant. APEC is a forum for 21 member economies created to promote trade liberalization and enhance economic co-operation among its members. These 21 member economies account for roughly 40 per cent of the world’s population and approximately 55 per cent of world GDP. The membership includes the world’s three largest economies — the United States, China and Japan.

Being nominally an institution of ‘economies’ and not explicitly of sovereign nation states, the membership includes the participation of Hong Kong as an independent economy and of Taiwan. It is notable that APEC is the one of the only forums that allows Taiwanese participation along with China. This year marks APEC’s 25th anniversary; China is the current chair and will host the annual summit in 2014. APEC reaffirms amongst its priorities this year its commitment to advancing regional economic integration by working to achieve the Bogor goals through regional trade agreements and free trade agreements.

Rivalry between the US and China will, it is presumed, remain a strong undercurrent for this year’s summit. One example of the continuing competition comes from China’s proposal to the members and strong lobbying in favor of the members joining a proposed new regional development bank – the Asian Infrastructure Investment Bank (AIIB). The United States meanwhile has been critical of the proposal and, in quiet conversations, has urged other members to reject the proposal. The US Treasury Department has criticized the proposal, for among other things, undermining the World Bank and the Asian Development Bank. The AIIB, for which China pledged to provide most of the $50 billion start-up funding would diminish the regional influence of these two bank facilities.

Another point of contention between China and the United States is the potential to complete negotiations for the Trans Pacific Partnership (TPP). This mega-regional deal is an effort to establish a free-trade group including some 12 nations and about 40% of the global economy. But the negotiations do not include China. Meanwhile, the US is pressuring China to open up more industries to foreign investment and to pursue greater economic reform.

Ultimately, APEC provides leaders from these 21 member economies an opportunity to meet, talk and address issues that resonate beyond just economics. The exponential and unprecedented rate of growth China has seen the past several decades has captured the attention and imagination of the international community. China has become the number one trade partner for many of these same member economies.

China

Although China has indicated that it is open to joining the Trans-Pacific Partnership, domestically, China faces a number of uncertainties and challenges. What is perceived by the United States and other countries in the region as ‘Chinese exceptionalism,’ is in reality a unique and complex predicament. China’s slowing economy is a source of concern for its leaders and has also been noted by the international community. It is still going through a period of adjustment to new leadership. President Xi Jinping is perceived to be the most charismatic and dynamic leader since Deng Xiaoping. His reign has brought bold and sweeping changes, and he has proven fearless in challenging the old guard. China’s internal problems with ethnic minorities persist and have erupted into protests and more dauntingly, a series of terror attacks. Most recently, the Occupy movement in Hong Kong has highlighted China’s reluctance to politically reform.

Externally, China is currently involved in a number of territorial disputes in the Asia-Pacific region. China’s ongoing dispute with Japan over the Diaoyu Islands (Senkaku in Japanese) shows no sign of either side conceding to the demands of the other. China also became embroiled in conflict with Vietnam over areas of the South China Sea. China boldly towed an oil drilling well into waters it claimed were extensions of the Chinese controlled Paracel Islands. Additionally, the Philippines recently sued China in the U.N. arbitral court over a fishing dispute in the Scarborough Shoal. There is no doubt that China has increased its activity and presence in the Asia Pacific as the disputes in both the East and South China Seas reflect.

There are two relationships within this context that should be highlighted as APEC draws closer: China’s relationship with Japan and Taiwan. The fragile nature of China’s relationships with both these economies have deep roots that extend beyond the organization of international co-operation. The precariousness of these relationships are particularly pertinent today as China tries to assert greater regional dominance. Both Japan and Taiwan have traditionally been allied and supported by the US. The alliance between the US and Japan in particular has grown stronger as the perceived threat containing China has loomed larger. Taiwan’s relationship with the US is more sensitive and often contingent on not overtly offending China. Politically and economically, Taiwan is currently in a position whereby China could achieve real progress in cross-strait relations but for the difficulties that have arisen recently.

Japan

A key focus at this year’s APEC Leader’s Summit is whether there will be a bilateral meeting between Xi Jinping and Japanese Prime Minister Shinzo Abe. The two have not had a one-on-one meeting since Abe re-entered the prime minister’s office in 2012. There were high hopes that with China opportunely hosting APEC this year, there may be a chance for a bilateral meeting between the two key leaders. Though relations have been exceptionally tense in the past couple of years, bad blood between China and Japan has existed for some time. China remains indignant over Japanese war crimes committed in China during the Second World War and have repeatedly called on the Japanese government to take a more apologetic stance on its past transgressions. Particular sensitivity has been expressed over the periodic visit of Japanese leaders to the Yasukuni Shrine, a memorial honoring Japanese war dead that China perceives as an emblem of Japan’s past militarism.

China-Japan relations have deteriorated further with the dispute over the Senkaku/Diaoyu Islets. The Senkaku Islands, known as the Diaoyu Islands in Chinese, are a series of small islands in the South China Sea claimed by both the Chinese and Japanese governments. These islets were privately owned until the Japanese government made a move to purchase them in August 2012. Japanese actions were seen to upset the status quo and there have been numerous confrontations since between Chinese and Japanese military and civilian vessels in the area. While Japan does not acknowledge the dispute over the Senkaku/Diaoyu Islands as an official territorial dispute, China has been vocal that it will not back down from its claim over the islands. Chinese President Xi Jinping has proven to be assertive and has continued to increase China’s military spending. China announced its 2014 defense budget to be USD 132 billion, a 12.2% increase from 2013. A number of countries currently embroiled in dispute with China see these China actions as very troubling.

With China and Japan being the 2nd and 3rd largest economies in the world respectively, the importance of a meeting of leaders and the relationship between the two nations affects not only the APEC member economies, but geopolitics. Beijing has implied that conditions for such a meeting to occur would necessitate a sign from Prime Minister Abe that he will not be visiting the Yasukuni Shrine for some time (perhaps indefinitely) and for Japan to recognize the tension over the Diaoyu/Senkaku Islets as an official territorial dispute. With the Chinese economy slowing and investment from Japan relenting, there are economic reasons for Beijing to warm up to its rival and important trading partner. Japanese direct investment in China dropped 40% in the first half of 2014 from its already sluggish performance the year before, as many Japanese enterprises, feeling unwelcome in China, have shifted their investment to South East Asia. China’s Minister of Commerce Gao Hucheng recently stated that China does not want the lack of political detente to affect Japan and China’s trade relationship. Prime Minister Shinzo Abe has recently expressed hopes of meeting President Xi. During his visit to New York for the United Nations General Assembly, Abe stated “a meeting and a handshake between leaders alone can lead the way to regional peace and security.”

The year began on a positive note for China-Taiwan cross-strait relations. On February 11th, a delegation from the Republic of China (Taiwan), headed by Minister of Mainland Affairs Minister Wang Yu-Chi, was received by the People’s Republic of China (China)’s Vice Foreign Minister and Minister for Taiwan Affairs Zhang Zhijun in Nanjing. This historic meeting marked the first official cross-strait talks since the establishment of the People’s Republic of China (China) in 1949. The People’s Republic of China has considered Taiwan a Chinese province and has never ruled out the possibility of forcefully regaining control over the island. Cross-strait economic ties have strengthened significantly in recent years; Ma Ying-Jeou, Taiwan’s president since 2008, is an advocate of deeper ties with the mainland, having signed a series of landmark trade and economic agreements cementing China’s position as Taiwan’s largest trading partner. The February 11th talks resulted in both sides agreeing to set up representative offices.

A mere two months later, thousands of Taiwanese students occupied the debating chamber of the Legislative Yuan, Taiwan’s parliament, to prevent the passing of an agreement that would allow for freer trade with the People’s Republic of China. Dubbed the “Sunflower Movement”, the students protested for weeks in fear that the passing of the services agreement, which would allow Chinese investment in sensitive sectors such as telecommunications and publishing, would result in more Chinese political influence over Taiwan. The student protests perhaps also reflected general frustration with Ma Ying-Jeou’s affinity for the mainland. Ma’s ‘pro-China’ stance has caused internal friction within the Kuomintang party. It is widely known that Ma, whose presidential term ends in 2016, hopes to build his political legacy on the consolidation of ties with the mainland. Ma has been vocal about hopes of meeting Chinese President Xi Jinping before the end of his presidency.

The 2013 APEC Summit in Bali, Indonesia, was Chinese President Xi Jinping’s first since assuming leadership. In the absence of US President Barack Obama, Xi arguably ‘stole the show’. A key highlight of his performance were his comments on Taiwan. On the sidelines of the Summit, the Chinese president advocated that “both sides of the Strait are of one family.” More recently, Xi told a visiting Taiwanese delegation that “one country, two systems” would be the best way to realize reunification. However, given China’s current treatment of the suffrage movement in Hong Kong, it is unlikely that Taiwan has much confidence in China’s “two system” rule, hampering reunification optimism. Feeling internal pressures, President Ma recently called for Beijing to grant Hong Kong the promised civil liberties and autonomous rule, reaffirming Taiwan’s rejection of reunification with the mainland under a Hong Kong style system. How China continues to address the issue of Taiwan in the context of global summitry and amongst the international community is important. Hopes were high that APEC 2014 Summit would present an opportunity for an historic meeting. That is no longer the case.

Though APEC is intended as a platform to conduct progressive, cooperative economic dialogue amongst member economies, geopolitical issues often manifest themselves. China undoubtedly will be at the center of attention at this year’s APEC Summit. President Xi has the opportunity to host this high profile Summit and he will undoubtedly not allow China to lose face.